FBLG Banking Letter - August 2019 Edition
Survey Closing August 30!
We've had tremendous response to the 2019 Independent Bank Compensation Survey, but you still have time to participate. All reports are free of charge and accessible online to survey participants. When you participate in the survey, you are automatically entered into the prize drawing for a $500 Amazon Gift Card.
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Proposals to Further Delay CECL Implementation: First by Lawmakers and Now by Standard Setters
Since the Financial Accounting Standards Board (FASB) issued their Accounting Standards Update in June of 2016 regarding the current expected credit loss (CECL) model for measurement of credit losses, there has been continued criticism regarding implementation. The CECL model aims to require financial institutions to estimate and record loan losses when loans are originated, as opposed to the current model where those losses are recorded when the loan is deemed to be impaired. Criticism has been shared by financial institutions of all sizes, trade associations, and lawmakers alike. Each group argues that rushed implementation will result in financial burdens on institutions and possible restrictions on consumer lending.
Rule Simplifies Regulator Capital
In an effort to reduce regulatory burden, in July 2019 the Federal Deposit Insurance Corporation, the Board of Governors of the Federal Reserve System and the Office of the Comptroller of the Currency (the “Agencies”) adopted a rule that simplifies several requirements for regulatory capital rules. The rule is in line with the Economic Growth and Regulatory Paperwork Reduction Act report issued by the Agencies in 2017, which committed to reducing regulatory burden for community banks.
Cybercrime Challenges and Risks
Over the past the past several years there has been a significant advance in cyber risk assessment maturity, to help thwart cybercrime. There has been wide recognition that security and risk frameworks provide an excellent process for assessing risk. Increasingly, boards have been asking for quantitative measures of cyber risk, similar to what other areas in the organization have been doing for a long time, such as measuring the financial impact of the risks.
Opportunity Zone Tax Deadline Looming
The Opportunity Zone is an investment vehicle created by Congress in the most recent overhaul of the tax code. The Opportunity Zone Funds are investments in targeted, designated low-income areas of the country and come with significant tax incentives, including a reduction in capital gains on the investment. One of these potential capital gain reductions will disappear by the end of 2019.